There Is No New Chinese “Sharing Economy”. Didi, Mobike, and Others Are Classic Disruptors (Pt 1).

In the past month, there has been a lot of talk about China’s new “sharing economy”. Articles in the New York Times, Fortune, Bloomberg, and the South China Morning Post have all cited ride-sharing (Didi), bicycle rentals (ofo, Mobike), and the new micro-rental services for batteries, basketballs, and umbrellas as part of a new China “sharing economy”.

But this is not really true. The term “sharing” is misleading. And it all misses a much more interesting phenomenon: the emergence of a new type Chinese disruptor.

Here’s my take on what is really going on.

Point 1: There is no new Chinese sharing economy.

First, some terminology, as I think this is creating most of the confusion. Keep in mind, nobody really knows what the “sharing economy” is. It’s a legacy term that is pretty confusing. For example:

If I put my home on Airbnb, that would be considered “sharing” in the most traditional sense because it is a peer-to-peer transaction and uses an asset outside of the traditional hotel market.

However, if a small company lists 20 owned or contracted apartments on Airbnb is that still sharing? That isn’t peer-to-peer and it is pretty similar to a small hotel or rental business.

If 10 different people rent the same ofo bicycle for 20 minutes during a day, is that sharing or a rental? It seems like both. And if that is sharing (as many claim), then isn’t different people staying in the same hotel room over time also sharing?

What about sharing labor? If you contract a designer through a company like Elance, is that sharing? It’s peer-to-peer. Does it have to be a physical product to be sharing?

What about Spotify and other music or video streaming services? The customers are no longer buying the songs. Can you share products that are intangible like media?

And what about fractional ownership of jets or vacation apartments? That is a type of collaborative consumption. Also sharing?

You can basically play this game with any business that people describe as “sharing” because the terminology is so fuzzy. And the biggest problem is that sharing implies a physical product or asset, when so much of what is now going on in these businesses is with added services, data, labor and intangibles.

So my recommendation is to forget the term sharing economy. The key to understanding what has been going on in China with companies likes Didi, Ofo, and the others, is to ask the right question. If you get the question right, everything becomes clear.

Point 2: The question to ask is access vs. ownership.

When I get confused about a business situation, I think about the point of purchase. In this case, I think the right question is the one a consumer actually asks him or herself which is should I buy this or rent it? Should I own it or access it?

This decision between ownership and access is where both consumer behavior and business strategy diverge along two very different paths. And most of the best thinkers (Michael Porter, etc.) refer to these new companies not as part of the “sharing economy” but as innovators in the “access economy”.

Think about how different access and ownership businesses are. If you want to own a bicycle, there are lots of factors you consider: price; style and look, brand and reputation, premium vs. economy product; new vs. used. You also think about the bikes that are actually available at your local retailer, the distance to the store from your home, storage requirements when not using, frequency of usage; and so on. There is a lot going on in the consumer decision when it comes to owning something. And successful bicycle manufacturers, like Taiwanese Giant Bicycles, are structured specifically to compete on these factors – such as in design capabilities, manufacturing cost and scale, brand and marketing support, access to retail space, etc.

Now consider if you just want to access (i.e., rent) a bicycle for a while. You ask very different questions. What is the price per hour? Can I rent by the hour or do I need to take the whole day? Is there a bike rental store near where I want to go? Where do I drop it off when I’m done? Do I need a lock and helmet? And so on. Access businesses are mostly about two factors: price and convenience. Note: they also often compete on greater selection (think Spotify, a type of access business based on large selection). But price and convenience are the important factors for this discussion.

So in all these new China businesses, I think the question is access vs. ownership. And the big factors for access are price and convenience.

Point 3: China is now seeing a wave of “digital disruptors” in access and convenience.

What has really changed in the past 1-2 years in China is the arrival of smartphones, mobile payments, GPS and a very dynamic mobile app ecosystem. Other technologies like smart locks and kiosks have also arrived but these are less important.

For thinking about how these types of new digital tools and processes impact businesses, I refer you to the work of Jay Scanlan at McKinsey & Co. He has some great frameworks for this (an outstanding paper located here). But his main point is that digital disruption can impact demand, supply or both. And it can be mild or extreme

Rather than go through a bunch of theory, I’m now just going to jump to my conclusion and say that most of what we have been seeing is China with companies like Didi, Ofo, and the micro-rentals is new digital tools being used to disrupt Chinese access businesses – and mostly via increased convenience on the demand side. With the exception of Didi, most of these classic disruptors.

***

Ok. That was a bit of theory. In Part 2, I go through the new Chinese companies specifically. But it did require some basic frameworks first. Just remember:

Forget the term “sharing economy”.

Instead, think “access economy” vs. “ownership economy”.

New digital tools and processes (like smartphones) can disrupt demand, supply or both.

Most of what has been happening in China is classic disruption in access and convenience.

Now that the plan for a government-led bike-sharing scheme has been scrapped, it is time to take a closer look at the three private companies which have set up shop here. THE NEW PAPER tests Mobike, oBike and ofo

Two days after the latest bike-sharing platform, Mobike, launched here, the Government announced it would scrap its plan for a national bike-sharing scheme.

The Land Transport Authority, which had already attracted tenders for the scheme, said on Friday, March 24, that it has “reassessed” its plan as the three private companies, Mobike, oBike and ofo, are looking to roll out “many thousands” of bicycles over the next two years.

The companies said they are actively working with partners so that their bikes can be parked at public racks, after the East Coast-Fengshan Town Council recently objected to bikes being parked at its public racks for “rental business”.

There are teething problems – Mobike’s GPS led our reporters on a wild goose chase for bikes around the island, and some ofo bikes we found could not be unlocked using the app.

ofo

EASE OF RENTAL AND PAYMENT

Unlike its competitors, ofo does not have a GPS system. I had to visit several MRT stations before I found an ofo bike.

Rating: Nil

RIDING THE BIKE

The gear chains were oiled but not greasy, and the bike seat had ample space for me.

But the front handle and adjustable seat of the bike shifted whenever the bike experienced a significant bump.

ofo bikes offer three gear changes as opposed to the usual single gear bikes their competitors offer. Do not get your hopes up too high because these bikes are not built for speed.

Rating: 3/5

TNP PHOTOS: PHYLLICIA WANG, JONATHAN LEE

EASE OF RETURN

The return of the bike was simple. ofo’s return policy states that the bicycle should be parked in a safe location where bicycle parking is permitted in accordance with the local traffic rules, for use by the next person.

You end the trip by pressing a button on the app, and manually lock the wheel using a lever.

The return was far more pleasant than the rental.

Rating: 4/5

VALUE FOR MONEY

The pricing for ofo will be $0.50 per trip, but the rides are free for now.

Rating: 5/5

OVERALL

ofo bikes are wallet-friendly, and they provide users with a decent riding experience.

But it was so difficult to find one that it wasn’t worth the time and effort.

Mobike

EASE OF RENTAL AND PAYMENT

The Mobike app, available on Apple and Android devices, is easy to download.

There is a refundable $49 deposit and the Mobike Wallet can be topped up using a credit or debit card.

Locating the bike is meant to be easy using the app, which also allows you to reserve one for up to 15 minutes. But as we reported last week, eight out of 10 times, the bikes could not be found at their shown locations.

Rating: 2/5

TNP PHOTOS: PHYLLICIA WANG, JONATHAN LEE

RIDING THE BIKE

The Mobikes are light and the attached basket is handy. The built-in headlights and reflectors are helpful for late-night rides. But the current crop of Mobikes do not allow for the seat to be adjusted and they do not have gears.

Rating: 3/5

EASE OF RETURN

Mobikes can be returned at any public bike parking areas, such as those around MRT stations and HDB void decks. When a latch on the lock near the wheel is pulled, the app recognises that the ride is completed.

To discourage irresponsible bike behaviour, Mobike has a credit system that awards points for each ride, but it also deducts points for irresponsible parking or usage.

Rating: 4/5

VALUE FOR MONEY

Mobike charges $1 for every 30 minutes of use. Each time I top up, I get a number of free rides (as long as the ride is under 30 minutes), encouraging me to continue biking.

Rating: 3/5

OVERALL

Lighter and faster than its competitors here, Mobike has the potential to become the better option once the app instructions and GPS are fully optimised for Singapore use and usage charges become more flexible.

A spiralling oversupply of shared bikes in China is leading to huge piles of broken and unused bicycles in cities across the country.

Over the past year, about 30 companies have madly pumped out millions of new bicycles from factories, distributing them in major centres in a battle for market share.

The two biggest companies, Ofo and Mobike, claim to collectively have 20 million users registered with their services.

The bicycle boom has revived cycling in a country that was once affectionately referred to as the bicycle kingdom, prior to three decades of high-speed economic growth that flooded the streets with cars.

But now there is growing concern about a bubble, as big investors rush to pour money into bike sharing.

The key appeal of the shared bikes — that they do not need to be returned to a dock — is proving problematic in busy spots, where bikes are piling up and blocking pedestrians.

PHOTO Broken and discarded shared bikes pile up in a Beijing backstreet.